Agencies to join forces for probe into demat scam

Shaji Vikraman, TNNDec 26, 2005, 01.04am IST

MUMBAI: The government has set in motion an exercise involving multiple agencies to probe the alleged manipulation of the IPO allotment process by the use of benami demat accounts to corner shares in public offerings.

Besides capital market and banking sector regulators, the income-tax department and the investigative arms of the government have been roped in to unravel the complete chain of events and individuals associated with this manipulation, according to government officials.

The primary focus of the probe would centre around a couple of investors who had opened multiple demat accounts and manipulated allotments. However, the exercise is also aimed at identifying systemic deficiencies and at carrying out improvements, officials said.

On December 15, Sebi announced that it had spotted a single investor with 6,500 demat accounts and another one with 1,315 accounts which it reckoned were used to corner a large number of shares in the IPO of Yes Bank.

The regulator has already pulled up Karvy-DP, which ran the demat accounts, besides directing National Securities Depository Ltd (NSDL) to carry out a comprehensive inspection of the depository participant. Bharat Overseas Bank and Vijaya Bank, which permitted the investors to open multiple accounts, are also tipped to face regulatory action.